Spending efficiency in the public sector

As Saudi Arabia works toward diversifying its economy and strives to realize the ambitious objectives set forth in Vision 2030, the public sector is strategically navigating fiscal constraints. At the same time, the government is actively improving its service delivery to provide efficient, effective, equitable, and quality services to its constituents to meet its sustainability and development objectives.

According to the IMF, Saudi Arabia’s expenditures in 2022 amounted to 28.23 percent of GDP.  As a result, there are increasing expectations that spending on programs is efficient and effective, and that investments have good value for money. This paper aims to raise awareness and explores a transformative concept where cultivating an investment mindset in the public sector becomes key to achieving its mandated spending efficiency targets set in Vision 2030. At its core, this concept represents a shift from the traditional, cost and spend-focus to a more holistic and investment-focused approach. Such a shift has the potential to transform public sector operations, resource allocation, service improvement, and as a result, deliver greater value and impact.

This definition sets the stage for a deeper understanding of the spending efficiency ecosystem in Saudi Arabia and explores the challenges faced by public sector entities as they embark on their journey to become more efficient.

These challenges range from a time-consuming decision-making process and reluctance to change in the organization, to outdated/complex processes and limited resources and capabilities and are exacerbated by a lack of clear accountability, inflexible budget categories, use-it-or-lose-it budget expectations, and a short-term focus mentality. Understanding these obstacles is the first step toward effectively addressing their root causes and finding sustainable solutions to increase efficiency.

To help entities build an investment mindset when it comes to evaluating and executing spending efficiency projects, and to realize the benefits of those projects, we introduce key considerations that are needed to build a culture of holistic evaluation of spending efficiency opportunities and the adoption of new ways of working and decision-making processes to successfully implementing and realizing the benefits.

We conclude by highlighting the short-term actions of how government entities can initiate efforts to embed an investment mindset in their culture, operations, and decision-making process.